Recent news on how FBT will be calculated on ESOP. Still there are some issues that will have to be clarified, especially on foreign-listed stocks.
FBT on ESOP
Five key issues in FBT guidelines on ESOPs
Fringe benefit tax on stock options to hit MNC expats
Fringe Benefit Tax (FBT) on Employee Stock Options (ESOP)
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kalyanmalla
- Posts: 22
- Joined: Mon Feb 12, 2007 5:27 am
Fringe Benefit Tax (FBT) on Employee Stock Options (ESOP)
So is it better to sell all ESOP in US before leaving to India
I hope it is OK even if it is same year
I hope it is OK even if it is same year
Fringe Benefit Tax (FBT) on Employee Stock Options (ESOP)
kalyanmalla;54082So is it better to sell all ESOP in US before leaving to India
I hope it is OK even if it is same year[/quote]
I may be wrong but AFAIK FBT is a tax that the employer has to pay on granting ESOPs.
When, what price you sell those doesnt have any relation to FBT and its impact. The pity is if the employer decides to pass on the FBT burden to employees, the employee will be double taxed - once thru FBT on notional gain and once when the shares are sold.
It will hit most who are expats living in India and not the other way round (Indian expacts living abroad).
Fringe Benefit Tax (FBT) on Employee Stock Options (ESOP)
b2b;54084
It will hit most who are expats living in India and not the other way round (Indian expacts living abroad).
My understanding is that this will impact everyone who receives ESOPs while working in India. It includes expats who are coming to India for work in MNCs. Some R2Iers may fall in to this category and hence I started this thread.
kalyanmalla;54082So is it better to sell all ESOP in US before leaving to India
I hope it is OK even if it is same year
I dont know enough to answer your queries. Even the knowledgeable folks here would need more information from you before making any suggestions. You will have to provide more details about your situation for them to spend time on this.
Fringe Benefit Tax (FBT) on Employee Stock Options (ESOP)
kalyanmalla;54082So is it better to sell all ESOP in US before leaving to India
I hope it is OK even if it is same year
You should exercise the right before r2Ing not necessarily sell it. FBT is chargeable when ESOPs are allotted or transferred to the employees
Fringe Benefit Tax (FBT) on Employee Stock Options (ESOP)
sohu;54490My understanding is that this will impact everyone who receives ESOPs while working in India. It includes expats who are coming to India for work in MNCs. Some R2Iers may fall in to this category and hence I started this thread.[/quote]
Yes it will hit everyone who got ESOPs out of their employment in India.
I was just answering specific question raised by the poster - that it is related to excercise of the options than selling those (implied by the poster).
Fringe Benefit Tax (FBT) on Employee Stock Options (ESOP)
b2b;54529Yes it will hit everyone who got ESOPs out of their employment in India.
I was just answering specific question raised by the poster - that it is related to excercise of the options than selling those (implied by the poster).
Got it. Thanks b2b.
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back_in_des
- Posts: 193
- Joined: Wed Jan 17, 2007 1:51 pm
Fringe Benefit Tax (FBT) on Employee Stock Options (ESOP)
My understanding based on the advice of our accountants is briefly, MNC employees are not affected by FBT on ESOPs of US company.
In a typical MNC setup, there is a US company (let's call it X Inc) which is the parent company and then there is an Indian company (X India Private Ltd = XIPL). Typically XIPL is a subsidiary of the X Inc.
X Inc is a foreign company, XIPL is an Indian company.
All the people in India are typically employees of XIPL.
The ESOPs granted to employees of X Inc and XIPL are identical.
X Inc issues the ESOPs to the employees directly. XIPL is only a process facilitator.
XIPL doesn't issue it's own ESOPs ever. XIPL does NOT participate in any monetary transaction between it's employees and X Inc.
To exercise, XIPL employees, who have X Inc ESOPs directly go to their bank, buy forex, fill up form A2 (I may be wrong on exact form# to buy forex), and wire that to X Inc account directly along with exercise form. X Inc sends share certificates to XIPL employee.
XIPL employee does NOT pay to XIPL for it's stocks.
Foreign companies donot come under the Indian Income tax or FBT except in certain cases (if they have 5 or more employees directly in India, not through a subsidiary).
This is my understanding of a MNC setup that I am familiar with. Different MNCs may have different setup, because of which the FBT implications may be different.
In a typical MNC setup, there is a US company (let's call it X Inc) which is the parent company and then there is an Indian company (X India Private Ltd = XIPL). Typically XIPL is a subsidiary of the X Inc.
X Inc is a foreign company, XIPL is an Indian company.
All the people in India are typically employees of XIPL.
The ESOPs granted to employees of X Inc and XIPL are identical.
X Inc issues the ESOPs to the employees directly. XIPL is only a process facilitator.
XIPL doesn't issue it's own ESOPs ever. XIPL does NOT participate in any monetary transaction between it's employees and X Inc.
To exercise, XIPL employees, who have X Inc ESOPs directly go to their bank, buy forex, fill up form A2 (I may be wrong on exact form# to buy forex), and wire that to X Inc account directly along with exercise form. X Inc sends share certificates to XIPL employee.
XIPL employee does NOT pay to XIPL for it's stocks.
Foreign companies donot come under the Indian Income tax or FBT except in certain cases (if they have 5 or more employees directly in India, not through a subsidiary).
This is my understanding of a MNC setup that I am familiar with. Different MNCs may have different setup, because of which the FBT implications may be different.